As real property is making waves in Nigeria, investors in the sector have continued to invest without taking some salient issues into considerations. A lot who are into commercial business in real estate feel that to maximise the profits, they have to manage the business themselves or in extreme cases, bring their relatives who are not engaged in any meaningful occupation to manage it. They forget that hiring a property manager would go a long way in accumulating the desired profits and averting some of the toxic risks that may occur.
While every investor’s situation is different, there are certain scenarios and factors that typically pre-dispose owners one way or the other. In that wise, unless these scenarios and factors are addressed, management of the estate would be left in the hands of relatives who could mismanage it, by helping themselves without having the penchant for profits and losses. The following are designed to help you determine if you should consider hiring a property manager or not.
The distance between home and the estate
If you are close to your estate, you may be able to make the regular visits required for maintenance, inspections, or collections. Otherwise, the farther you live, the higher your travel time and expenses will be. The longer the distance, the more temptation there is to not keep a close eye on things, and that can be a recipe for disaster. You should plan making monthly scheduled visits and there is always the potential for a middle of the night emergency call that requires your immediate attention. In the long run, is this feasible for you?
Your ability to manage all manner of people and associated stress
This is a tough one. We all like to think of ourselves as level-headed and even-keeled, but at the end of the day it takes a special kind of person to deal with the ups and downs of property management. Behind the seemingly simple task of collecting rent every month lies a number of unpredictable problems that can push people to their limits. Ask yourself how you would react in the unfortunate event that tenants get into fights with other tenants or neighbours; have domestic disputes; conduct illegal business in the dwelling; carry on all night parties and revelry; try to sneak extra people or animals into the home; decide to sue you; trash the property; incite the wrath of the Housing Authority (HOA) because of repeated deed restriction violations; refuse to pay rent because they are a “professional tenant” and know how to work the legal system for the maximum amount of free housing at the owner’s expense?
Ability to manage your property without being overwhelmed
Managing rental properties can become quickly overwhelming, even for experienced investors. There is always something going on that requires attention and it takes very little time for things to get out of hand. Hiring a property manager can provide an opportunity to regain control and restore stability to both your properties and possibly life in general.
The number of rental properties under management
As your portfolio grows, so do the management challenges, and it becomes easier for things to fall through the cracks. Investors with large portfolios stand to reap significant benefit by leveraging the efficiencies a property manager can provide. Size can also constrain investors’ ability to consider purchasing new properties if they are already maxed out managing their current holdings.
Your experience in handling maintenance and repairs
If you can’t do it yourself, do you know who to call? Finding reliable handymen and contractors can take a while and in the mean time you may unknowingly hire people that are unethical, uninsured, do poor quality work, over charge, etc. Maintenance and repairs are a significant component of land lording and if you question your ability to ensure the work is done well and in a timely manner, you might want to consider hiring a facility management company.
Soliciting for clients
Advertising, fielding calls, and showing the unit can take a considerable amount of time, but are critical tasks as vacancies will quickly eat into your profit margins. If you question whether you have the skills or the time to make this happen, or if you have historically had an unacceptably high vacancy rate, you may want to consider hiring a facility management company.
Ability to handle your book keeping and make accurate records
From profit and loss statements to tax deductions, this area needs special attention and becomes an increasingly larger burden for larger portfolios. While some owners (especially those with a background in finance) will do just fine, others may opt to hire an accountant to help with the book keeping. If you feel like this might be a weak, point you might want to consider hiring a property management company.
Ready to be alert
It is important to address this point honestly because when an emergency happens at your property, you can’t ignore it. Your special event, important meeting, vacation, or personal crisis doesn’t relieve you of your obligation to your tenant. These emergencies don’t happen all the time but when they do, you have to be willing to handle them immediately. Can you handle being called at 2 in the morning to fix someone’s overflowing toilet? This is one out of many.
Handle recalcitrant and stubborn tenants
Many new owners dislike feeling like the bad guy and try to be understanding by making exceptions. The problem is that this only invites additional abuses and excuses by tenants. Late payments must be dealt with immediately, and while sometimes a friendly reminder is all that’s needed, other times, it can be a very confrontational process ending in eviction. Unlike running a charity, running a successful rental business means enforcing the rules even if it means evicting a single mother who lost her job and won’t be able to pay rent anytime soon.
Ability to understand the laws governing land lording
Ensuring the property is run in accordance with the law is critical in both preventing lawsuits and shielding yourself from liability if you are sued. Familiarity with contracts is also very important as your rental agreement is the only binding agreement between you and the tenant.
Time and attention needed
Ultimately, your decision to hire or not hire a management company should hinge on whether or not it is a good fit with your lifestyle and makes sense financially. Individual investors will have to assess the opportunity cost of both options based on their unique circumstances.